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Fitch keeps top AAA rating for France, outlook negative

Dec 13, 2012

PARIS - The Fitch ratings agency said on Friday that it was keeping France's top AAA credit rating, the only one of the three major ratings agencies to do so, but added that its outlook remained negative.

"The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, stable political, civil and social institutions and its exceptional financing flexibility reflecting its status as a large benchmark eurozone sovereign issuer," it said in a statement.

Nevertheless, Fitch's outlook remained negative, meaning that a future downgrade was possible, it said.

Future ratings will depend on the pace and scale of economic reforms in the country, in particular reforms to the labour market.

"The prospective reform of the labour market will be a key indicator of the political and public support for substantive measures that would enhance competitiveness and the growth potential of the French economy necessary to underpin confidence in the long-run sustainability of public finances."

One of France's weaknesses in terms of its credit profile is its level of public debt, which Fitch estimates will stand at a whopping 90 percent of gross domestic product (GDP) by the end of 2012, compared with the current median of 53 percent for other AAA-rated countries.

Out of AAA peers, only the US and the United Kingdom are more indebted, while that of Germany, the next most indebted AAA country, is at 82 percent and due to decline from next year.

The agency said it would watch for the government to meet "its deficit and debt targets and implement structural fiscal measures that provide confidence that public debt will be on firm downward path from 2014."